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Thursday, August 11, 2011

Mongolia's Mining Boom or Gloom?

A tiny highlight of my winning essay at Mongolian Repat Leadership Club in 2011. Can't wait for your feedbacks!!! ................................................................................................................................................................

Mongolia is the 19th biggest country with only 2.7 million people (UN 2010), making us the most sparsely populated country in the world. It has billions of dollars’ worth of untapped mineral deposits of copper, gold, uranium and coal reserves; and for many years we were called “the beggars sitting on a huge pile of gold”. But with the recent inception of several big mining projects (Oyu Tolgoi and Tavan Tolgoi to name the biggest), a transformation is on the horizon. The IMF projected a double-digit annual growth rate for years to come; and a quadrupling of GDP per head – currently only $2,000 - by 2018.

However few doubt that the boom is coming. Fears of resource curse, Dutch disease, and corruption are prevailing at the hearts of all Mongolians. Unfortunately, countries with abundant natural resources, does not necessarily boom. On the contrary, most tend to have less economic growth and less development than those with fewer natural resources. This happens when a country starts to suffer from (1) a Dutch Disease (an appreciation of the real exchange rate as one form of resource revenues enter an economy), which handicaps the sale of other exports and impairs the ability of domestic products to compete with imports; (2) a government’s mismanagement of resource or simply a corrupt institution. If we fail to make measures and prevention from these two factors, we will stay as the “beggars sitting on huge pile gold” permanently, because no matter how big income and profit we get in a bad institution, we will not get to see the benefits of mining boom.

Moreover it is important to note that 68.7 percent of our population is 15-64 years old, 27.3 percent are under 14, and only 4 percent are over 65 years old, which makes us relatively a young country; and for many years, Mongolia has suffered from a brain drain, where our most educated intellectuals stayed abroad, working in the higher waged countries; and had no tendency to return back to a Mongolian labour market. However, the recent mining boom might just change that.

Graduates are returning back, understanding that it is a now-or-never situation, where our future depends purely on our actions taken today regarding this mining boom. We will either end up becoming one of the tragic African countries, which suffers severely from a resource curse, or be a wealthy welfare state like Norway, Denmark, and other oil countries like Saudi Arabia, Brunei, Kuwait, Qatar, Bahrain, Oman and UAE. We are small, have such a measly population, and have the opportunity to become the next wealthy citizens of the world. It is possible, but there are so much welfare and tax reforms, and fiscal policy measures we need to make.
....................................................................................................................................................................Should I continue? Yours truly,B